Inactive Savings Accounts Can Be Turned Over to Your State

The state will take your money if you’re not vigilant. I received a warning the other day that I’m in danger of having the funds in one of my savings accounts handed over to the state of New Jersey. I’ll explain why in a moment.

First, I should explain that rather than keeping a simplified financial situation like the one I praise in Seven Zen Principles to Guide Your Money and Your Life, I have savings accounts at fourteen different banks. (I took a minute to count them for verification.) My balance sheet is this long because I open accounts somewhat compulsively to audition and review them on Consumerism Commentary. Therefore, my situation shouldn’t be common. I would say most people have savings accounts at only one or two banks.

With fourteen accounts, even if they are listed and updated frequently in Quicken, it can be difficult to manage your money. If you don’t move money around in each account, the bank is required to turn your cash over to the state, a process called escheatment. The rules are different in each state, but in my state of New Jersey, accounts I own are considered inactive or dormant after a period of two years with no activity.

Earning and receiving interest every month isn’t considered activity. Interest credits have been the only line items in my E*TRADE bank account since I opened it in January 2009. The bank is required to inform me that my account will be released to the state in six months unless I initiate a transaction. I received a letter from E*TRADE the other day stating that.

Since there has been no activity in your account(s) listed above for at least six months, the account(s) has/have been classified as inactive. After 24 months, inactive accounts will be considered dormant. As stated in our Account Agreement, if any of your E*TRADE accounts remain dormant for a specified period of time (as determined by each state), we may be required by law to turn over any funds in your account(s) to the state.

I remedied the problem quickly by transferring a good portion of my money in this account back to my very active electronic checking account at ING Direct. If I were to take no action by next January, E*TRADE would forward my cash to the state as abandoned property. At that point, I could go through the process of claiming the money, but it would be a hassle.

Savings accounts are not the only types of property that can be escheated. Any property where the holder can’t get in touch with the owner is fair game. That includes brokerage accounts, savings accounts, and checking accounts that have been inactive, as well as real property, safety deposit boxes, and insurance policies.

Even an automated monthly transfer doesn’t stop an account from becoming inactive for the purposes of escheatment, so monitor your accounts.

Hello Luke, this just happened to my parents. They had put money away for among all things, their burial fees. The state took about $ 20,000.00 from them. They speak broken English and sometimes have a hard time understanding. No one took the time to explain this to them. They had no clue this could happen. Is there anything they can do about this? Thanks Larry

Absolutely. Every state maintains a list of funds escheated to the state. You can start with the resources listed here. All you need to do is contact the state using the forms on those resources, and you will receive your money back.

Dear Luke:
My savings account was taken by the sate and I went into the Missing Money site and they request my social security number, which I am very uncomfortable giving. Is this normal? I have answered all the other questions and would prefer not to give my social security number on the internet. What are your suggestions?

States can require Social Security numbers for claiming abandoned property. But if you’re understandably uncomfortable with submitting your SSN over the internet (you should be fine as long as you’re on the correct website and the connection is secure), you can usually print and mail a form to the state’s abandoned property unit.

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed.
Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and
conditions.